As I sit here at the Produced Water Society (PWS) in Midland, Texas, I can’t help but get excited by all the progress that is being made with produced water moving towards beneficial reuse and turning from waste product to new water. There are close to 500 people here and about 30 different operators. But we also have Texas regulators from the Railroad Commission (RCC) and Texas Commission on Environmental Quality (TCEQ).
I mentioned in my last column the new legislation that allows operators to sell produced water, while shielding them from liability, which is a big deal and mentioned that we were expecting an announcement from the Texas Supreme Court on the Cactus Services vs. COG Operating. Well, we got that announcement and as I expected, the Texas Supreme Court ruled that the produced water belongs to the mineral rights holder and not the surface right holder. But let me provide some background.
Cactus Services vs COG Operating. The Collier family leased 37,000 acres of land in the Permian basin’s Reeves County to Midland-based COG Operating LLC. The company drilled 72 horizontal oil and gas wells that generated more than 52 MMbbl of produced water. COG spent over $21 million to dispose of the produced water, based on court records.
The Colliers family then contracted with Houston-based Cactus Water Services, giving Cactus rights to the produced water from oil and gas production, which had been managed by COG and had been disposed of off-site. COG sued Cactus in 2020, arguing that it owns the produced water. The basis of this case is who owns the produced water: the mineral rights holder or the surface right holder. Keeping in mind that the surface rights holder also owns the groundwater under Rule of Capture in Texas. The Texas Supreme Court was clear on this: produced water is not groundwater, but a byproduct of the oil and gas production.
Why produced water ownership is important. This is important, as we move to produced water going from a waste product to a valuable commodity. Would you invest in this process, if someone could take the produced water away from you after you invested in creating the value? Well of course not, so this case created a risk that left some people reluctant to invest in creating this new market. But now, we have legislation allowing the sale of produced water, with liability protection and this new Texas Supreme Court ruling. Now the cherry on top is Senate Bill 7
Senate Bill 7 is an historic $20 billion investment in Texas water infrastructure and new water. Produced water is included in this new water. Governor Greg Abbott, in his State of the State Address, called on the Texas legislature to make the largest investment in water in Texas history. Senate Bill 7 provides a $20 billion generational investment for both new water supply and for the repairing of existing infrastructure. Governor Abbott stated, “With this law, we will secure Texas water future for generations to come.” These efforts provide some additional resources to get produced water from Waste to Commodity.
PWS 2025: Permian basin. After disappointment in the progress that we thought New Mexico was going to make, Texas has just made tremendous leaps and bounds. So, as I sit here at PWS, things just got better. Ted Wooten with the Railroad Commission (RRC) announced that he expects the RRC will receive primacy from the EPA on Class VI Carbon Sequestration wells before the end of the year, allowing this process to become much more streamlined.
Then, we had Catarina Gonzales with the TCEQ, stating that they are moving quickly on a draft permit for Agricultural Reuse. This, again, is important, because it will define standards for produced water reuse, making it easier in the future. You no longer have to treat water to as clean a level as possible and hope that they will approve your permit. Now, you know that standard and only have to treat to that standard, at least for Ag reuse. But they also discussed the new permitting requirements for Class II disposal wells, making the process more difficult and expensive and potentially restricting your capacity, as pressures increase.
Not all good news. As I mentioned, we are seeing increased permitting requirements. As an example, you had an Area of Review (AOR) of one-quarter mile, where you had to research and evaluate impacts within the AOR. Now, that increases to 2 mi, an eight-time increase, making this step much more complex. We are also looking at tracking bottomhole pressures (BHPs), and increasing pressures can then limit your capacity, even without an seismic event.
So now, there is more risk developing disposal wells, as you could have your capacity restricted, even without an earthquake. This will only increase the cost of disposal and put more pressure on operators to find alternatives. But there was more. As pressures continue to increase in these disposal well formations, the capacity of existing wells is reducing. We could see a 20%-to-30% decrease over the next five years, while volumes are increasing. So, we need to not only account for new produced water from new wells but make up the shortfall from the declining capacity of existing wells, while the process for these new wells is more expensive, longer and riskier.
We have mentioned in previous columns that disposal wells went with deeper, more expensive disposal wells, as the shallower disposal well formations were increasing in pressure, making it more difficult to drill new oil and gas producing wells. As we increased the deeper wells, we experienced seismicity issues—earthquakes. The culprit was determined to be deeper wells, and we transitioned back to shallow-well disposal and pressures increased. We experienced an increase in blowouts with older, abandoned and not properly closed wells, which started to leak produced water, with produced water geysers forming.
Now, we are seeing these same shallow disposal wells impacting oil-producing wells, and the lawsuits over this issue are starting to mount. What to do? We are seeing long-haul pipelines sprouting up, where produced water is being moved away from these areas, which are experiencing seismicity or just high pressures, to areas less impacted. This, again, does provide a solution, but it also increases cost. What on the surface looks like more bad news is really providing the necessary pressure to keep moving to reuse over disposal.
Ultimately, we will see a more diverse program, where disposal will be local and long haul. Recycling will have a role, but so will evaporation and reuse. Recycling facilities with their large-scale pits will be multifunctional facilities, where we will see recycling, evaporation and reuse. I will keep you informed of this progress. Until next time. WO
MPATTON@HYDROZONIX.COM / MARK PATTON is president of Hydrozonix, an oil and gas-focused water management company. He is a chemical engineer with more than 25 years of experience developing new technologies for wastewaters and process residuals.